TREASURIES-U.S. bond yields rise on trade, Brexit hopes

    * U.S., Chinese officials to meet in hopes for a trade deal
    * UK's May to meet opposition leader to break Brexit impasse
    * U.S. private jobs growth slowest since Sept 2017 - ADP 
    * U.S. services activity declines to weakest since Aug 2017
- ISM

 (Updates market action, quote)
    By Richard Leong
    NEW YORK, April 3 (Reuters) - U.S. Treasury yields climbed
to 1-1/2 week highs on Wednesday as hopes for a trade deal
between China and the United States and a breakthrough for
Brexit touched off a sell-off in the bond market.
    Encouraging data in China and Europe soothed some worries
about a global economic slowdown, reducing the safe-haven appeal
of low-yield U.S. government debt.
    Weaker-than-forecast figures on U.S. private jobs growth and
services industry activities limited the selling in Treasuries.
    "The market is looking for direction right now. People are
waiting for the next shoe to drop," said Larry Milstein, head of
government and agency trading at R.W. Pressprich & Co in New
York. 
    At 10:42 a.m. (1442 GMT), the yields on benchmark 10-year
Treasury notes were 2.5062%, up 0.03 percentage
point from Tuesday. They hit a 1-1/2 week peak of 2.524% earlier
Wednesday. 
    Their premium over three-month bill rates grew to
8 basis points from more than 4 basis points late on Tuesday.
    Last Thursday, 10-year yields fell below three-month rates
for the first time since 2007, stoking fears of a recession.
This inversion between the two yields preceded every economic
downturn in the past 50 years.
    For now, those fears were replaced by traders' optimism for
a successful outcome in the latest round of trade talks between
senior White House and Beijing officials.
    A possible end to the trade fight between the world's two
biggest economies will likely bolster stock prices and put more
upward pressure on bond yields, traders and analysts said.
    "If they could cut a deal, that would be positive for risky
assets," Milstein said.
    A meeting between UK Prime Minister Theresa May and
opposition leader Jeremy Corbyn fed hopes for a breakthrough to
reach a parliamentary approval of a deal for an orderly exit for
Britain from the European Union.
    In addition to those developments, upbeat overseas data
lifted investor sentiment. 
    The Caixin/Markit services purchasing managers' index (PMI)
rose to 54.4, the highest since January 2018.
    Euro zone retail sales increased 0.4 percent in February,
more than the 0.2 percent gain forecast among analysts polled by
Reuters.
    Wednesday's data on the U.S. economy, however, were dour by
comparison.
    The Institute for Supply Management said its index on
activity among U.S. services industries fell to a 1-1/2 year low
in March, while ADP reported the private sector added 129,000
workers last month, the fewest since September 2017.

April 3 Wednesday 10:44AM New York / 1444 GMT
                               Price                  
 US T BONDS JUN9               147-21/32    -21/32    
 10YR TNotes JUN9              123-136/256  -8/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.385        2.433     -0.001
 Six-month bills               2.3875       2.4569    0.005
 Two-year note                 99-218/256   2.3267    0.019
 Three-year note               100-64/256   2.2865    0.021
 Five-year note                99-24/256    2.3184    0.028
 Seven-year note               98-248/256   2.4112    0.032
 10-year note                  100-252/256  2.5116    0.033
 30-year bond                  101-132/256  2.9235    0.038
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       18.30        1.20      
 30-year vs 5-year yield       60.40        1.35      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        11.75         0.25    
 spread                                               
 U.S. 3-year dollar swap         8.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         4.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -25.00         0.00    
 spread                                               
 

    
 (Reporting by Richard Leong
Editing by Nick Zieminski)
  

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